Germany has remained the top solar PV installer in the world for last so many years. It has reached to 38.7 GW of the installed capacity by the end of May 2015 running ahead of China, Japan and United States of America. Germany has installed around 1.5 million solar PV systems across the country including small solar roofs, commercial solar systems and large scale solar parks. These systems together have contributed more than 6% of the total electricity consumed by the Germans in 2014. This shows the pace and aggression in shifting the energy portfolio of the country from fossils fuels to the renewable energy.

The Solar Insolation Levels of Germany:

The average annual solar insolation of Germany is \(\color{navy}{3.01\ KWhr/m^2/day}\),

Lowest: \(0.72KWhr/m^2/day\) in December

Highest: \(5.01 KWhr/m^2/day\) in the month of May

It is clear that Germany receives low solar radiation that is it is not as sunny as India, which has average solar insolation levels of \(7KWhr/m^2/day\) but still it has managed to remain top solar PV installer in the world for so many years. The solar insolation levels are important parameters in determining the payback period and financial feasibility of the solar roof.

What are the main forces that have accelerated the growth of solar PV in Germany in spite of low solar insolation levels?The main reasons for Germany solar PV growth are as follows:

(1) Well defined Renewable energy targets

In an attempt to de-fossilize the electricity production, Germany has set the minimum targets of electricity consumption from renewable energy

40-45% of total electricity consumption from renewable sources by 2025

55-60% by 2035

80% by 2050

There is a strong political support behind this aggressive growth which is pushing Germany to achieve its renewable energy targets. These targets are acting as a booster which is gradually shifting the countryâ€™s energy dynamics from fossil fuels to the renewable energy. Before, 2006 the contribution from solar energy in the total electricity consumption by the country was negligible, but it started increasing gradually from 0.4% in 2006 to more than 6% in 2014 of the total electricity consumed by the Germans. Please check the table below:

Year

Capacity (MW)

Annual Yield (GW-hr)

% of gross electricity consumption

2006

2899

2220

0.4%

2007

4170

3075

0.5%

2008

6120

4420

0.7%

2009

10566

6583

1.1%

2010

17944

11729

1.9%

2011

25429

19599

3.2%

2012

33033

26380

4.3%

2013

36337

31010

5.2%

2014

38236

34930

6.0%

(2) An Effective FIT policy mechanism

The Germany Feed-in-Tariff program has been supportive enough to promote the growth of solar PV in the country. The FIT rates are different for various sizes of solar PV installations which range from residential installations to the large projects. This FIT programme ensures a fixed compensation to the electricity produced for a period of 20 years. It is almost same as purchase power agreement but usually at higher rate. The transmission operators purchase the power produced and they sell to the market by adding a levy on the electricity called as renewable energy levy.

The heavy consumers of electricity are exempted from the renewable levy. The government policy of guarantying higher return through FIT program has attracted investors to develop the solar PV market and accelerated the solar PV growth in Germany.

(3) The renewable energy levy is not uniform

The average retail electricity rates have increased by 50% in last 15 years after adjusting for the inflation rate. The major contribution to this increase is renewable energy levy. This is basically done to recover the payments made by the government under FIT program to the renewable energy developers and investors. Although, this has increased the electricity bills of German household, in fact the residential electricity rates are among the highest in the world, but this strategy has kept the cash cycle running and has enabled the government to perform effectively in promoting solar PV program in the country.

The industries which consume heavy electricity are exempt or partially exempt from the renewable levy. The basic reason to exempt from this levy is to keep German industries competitive among industries in the other countries.The FIT system is designed in such a way that high renewable levy on residential and commercial customers is to exempt the industries from the levy so as to insulate them from negative competitive effects and with time the FIT for the .solar has declined.

(4) The Declining cost of solar PV Installation

The unanimous acceptance of the countryâ€™s solar program has played an important role in bringing down the cost of solar PV installation from Euro 5/watt in 2006 to around Euro 1-2 per watt in 2014.The cost of installation is declining since 2006. It has declined from Euro 5,000/KWp to Euro 1640/KWp in 2014, a good 13% CAGR decline in the cost of installation.

Conclusion

It can be said that the solar PV market is saturating in the country as Germany is producing more electricity than needed and is exporting the extra electricity to the neighboring countries. Despite less sun hours, Germany has such a huge installed capacity, it can be said that the efficiency of solar roofs must be high to cater the Germany's energy demands. however, the FIT policy has driven the solar PV growth on a large scale in between 2009 to 2012.Please look at the table below:

Year

Capacity (MW)

Growth w.r.t. previous year

2009

10566

2010

17944

69.8%

2011

25429

41.7%

2012

33033

29.9%

Average Growth rate

47.1%

The period 2009 - 2012 has witnessed an impressive 47.1% of average annual growth rate. Thanks to the government's FIT policy mechanism that has contributed majorly in accelerating the growth to this extent. The country is reducing FIT every year to ensure efficient production of the electricity and to somewhat decelerate the solar PV growth so that it may not exceed the set target.An automated adjusted FIT policy based on number of solar PV installations per year would be effective in deciding the rates and keeping the solar PV growth under control. In the coming years, its growth may decelerate as compared the growth rate in the previous years. This may give a good opportunity to other countries, where solar PV market is still under developing phase, to exceed and reach the top slot position.